Question 1

In a perfectly competitive market, what is the relationship between price, marginal cost, and marginal revenue at the profit-maximizing output?

Accepted Answer

Price equals marginal cost and marginal revenue: $$P = MC = MR.$$

Question 2

Which of the following best explains the source of deadweight loss in a monopoly?

Accepted Answer

The monopolist restricts output below the competitive level, causing $$P \u003e MC.$$

Question 3

A firm in monopolistic competition in the long run will:

Accepted Answer

Charge a price equal to average total cost, but above marginal cost: $$P = ATC \u003e MC.$$

Question 4

If a firm is not maximizing profit in input markets, which of the following is true?

Accepted Answer

The marginal product per dollar spent on labor is greater than that of capital: $$\frac{MPL}{PL} \u003e \frac{MPK}{PK}.$$

Question 5

Which market structure is characterized by many sellers, free entry and exit, and zero economic profit in the long run?

Accepted Answer

Perfect competition

Question 6

In the context of monopoly, what is the profit-maximizing condition for output?

Accepted Answer

Produce where marginal revenue equals marginal cost: $$MR = MC.$$

Question 7

What happens to the oligopoly outcome as the number of firms increases?

Accepted Answer

Price approaches marginal cost: $$P \rightarrow MC.$$

Question 8

Which of the following is true about perfect price discrimination by a monopolist?

Accepted Answer

Deadweight loss is eliminated.

Question 9

A single-price monopolist will:

Accepted Answer

Create deadweight loss by restricting output and raising price.

Question 10

In the labor market, the marginal revenue product of labor (MRPL) is calculated as:

Accepted Answer

$$MRPL = MPL 	imes PX$$

Question 11

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

Horizontal demand curve facing the firm

Question 12

In a game theory context, what is a Nash equilibrium?

Accepted Answer

A situation where each player chooses the strategy that maximizes their own payoff, given the strategies of others.

Question 13

If a firm faces a downward-sloping demand curve and has some market power, which market structure is it most likely operating in?

Accepted Answer

Monopolistic competition

Question 14

Which of the following statements about monopolies is correct?

Accepted Answer

Monopolies can earn positive economic profit in the long run due to barriers to entry.

Question 15

In the long run, what happens to economic profit in monopolistic competition?

Accepted Answer

Economic profit becomes zero due to free entry and exit.

Question 16

Which of the following is a real-world example of an oligopoly?

Accepted Answer

The smartphone industry dominated by a few major brands.

Question 17

If a firm in a perfectly competitive market increases its price above the market price, what will happen?

Accepted Answer

The firm will sell no units.

Question 18

Which of the following best describes excess capacity in monopolistic competition?

Accepted Answer

Firms produce less than the output that minimizes average total cost.

Question 19

In a monopoly, how is the price determined for the profit-maximizing quantity?

Accepted Answer

From the demand curve at the profit-maximizing quantity.

Question 20

Which of the following is true about collusion in oligopoly?

Accepted Answer

Collusion leads to monopoly quantity and price, but firms have an incentive to cheat.

Market Structures and Input Demand in Microeconomics: Study Notes

Study Guide - Practice Questions